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An alternative term used for accumulated depreciation expenses?
- a)Provision for depreciation
- b)Cumulative depreciation
- c)Targeted depreciation
- d)Depletion
Correct answer is option 'A'. Can you explain this answer?
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An alternative term used for accumulated depreciation expenses?a)Provi...
Provision for depreciation is an alternative term used for accumulated depreciation expenses. Depreciation expense is recognized on the income statement as a non-cash expense that reduces the company's net income.
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An alternative term used for accumulated depreciation expenses?a)Provi...
Provision for Depreciation
Provision for depreciation is an alternative term used for accumulated depreciation expenses. It represents the gradual reduction in the value of an asset over its useful life. Here is an explanation of why provision for depreciation is the correct term:
Definition:
- Provision for depreciation refers to the estimated amount set aside each year to account for the wear and tear on fixed assets.
- It is a non-cash expense that reduces the book value of the asset over time.
Accumulated Depreciation vs. Provision for Depreciation:
- Accumulated depreciation is the total amount of depreciation expense that has been recorded since the asset was acquired.
- Provision for depreciation is the annual amount set aside for depreciation in a particular accounting period.
Impact on Financial Statements:
- Accumulated depreciation is a contra asset account that appears on the balance sheet and reduces the carrying amount of the asset.
- Provision for depreciation is an expense on the income statement that reduces the net income and reflects the decrease in the value of the asset.
Purpose:
- Both accumulated depreciation and provision for depreciation serve the purpose of allocating the cost of an asset over its useful life.
- They help in matching the expenses with the revenue generated by the asset.
Therefore, provision for depreciation is the appropriate term used to describe the annual depreciation expense incurred by a company.
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An alternative term used for accumulated depreciation expenses?a)Provi...
B
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An alternative term used for accumulated depreciation expenses?a)Provision for depreciationb)Cumulative depreciationc)Targeted depreciationd)DepletionCorrect answer is option 'A'. Can you explain this answer?
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